New Report: The Financial Impact of a Positive Employee Experience

June 19, 2018 Sarah Mulcahy

Office Laughter

McKinsey has dubbed employee experience “essential to compete” in today’s war for talent. Some companies, like Airbnb, have even replaced the chief human resources officer position with chief employee experience officer. But those of us who have been in the people business for a while may wonder how experience is different than satisfaction or engagement or happiness. What is employee experience, in practical terms?

The WorkHuman Analytics and Research Institute and IBM Smarter Workforce Institute sought to answer this question in a groundbreaking study of more than 22,000 workers in 45 countries and territories. The study culminated in the new Employee Experience Index, which outlines essential human workplace practices that lead to a positive employee experience, such as:

  • Organizational integrity and co-worker support
  • Meaningful work
  • Feedback, recognition, and growth
  • Empowerment and voice
  • Work-life balance

The study reveals strong links between a positive employee experience and work performance, discretionary effort, and even turnover intention.

Now we’ve taken the research one step further in a new report titled The Financial Impact of a Positive Employee Experience. The data reveals what many of us have long suspected – that taking care of your people reaps significant financial rewards. “Employee experience is not just about feeling good at work,” reads the report.

The report is packed with data that will peak the interest of your CEO, CFO, and even head of sales. Specifically, we looked at two of the most commonly used measuring of profitability:

  • Return on assets (ROA), a ratio of net income to assets, is used to evaluate how profitable a company is relative to its total assets. The higher the ROA number, the better, because the company is earning more money on less investment.
  • Return on sales (ROS), also known as operating profit margin, is a financial ratio of operating income to sales. ROS calculates how efficiently a company is generating profits from its revenue. Organizations with high ROS show higher levels of efficiency.

We found organizations that score in the top 25% on employee experience report nearly 3x the return on assets and more than 2x the return on sales, compared to organizations in the bottom quartile.

What’s more, even a small increase in an organization’s employee experience index (EXI) score can make a huge impact on operating income. For instance, this means for a company with sales revenue of $600 million and ROS of 15%, increasing its EXI score by just 0.25 would lead to an increase in operating income of $11 million.

Perhaps what’s most exciting about this research is the fact that human workplace practices – such as recognition, empowerment, and feedback – that lead to these financial outcomes do not require a complete overhaul of your business. They’re simple, yet often overlooked or undervalued ways to show appreciation and treat your employees as human beings.

Which of these human workplace practices does your organization use? Are there specific areas you’d like to improve on this year? Let us know in the comments.

And don’t forget to download the full report here.

About the Author

Sarah Mulcahy

Sarah is senior content marketing manager at Workhuman. When not writing and reading about all things culture, leadership, recognition, and appreciation, she enjoys iced coffee, running, and spending time with her daughters, Mabel and Eva.

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